Undue favour to HJV costs Rs 200-cr in Himachal power plant: CAG

Awarding of contract work to an ineligible entity for the 800 MW Parbati II plant in Himachal Pradesh resulted in cost overrun of about Rs 244 crore for state-run NHPC, a CAG report has said.

The Comptroller and Auditor General (CAG) in its report has said that the hydro power generating company relaxed the Pre Qualification (PQ) criteria after sale of tender documents, regarding the contract awarded to the entity HJV for Parbati II project.

In the report titled ‘Capacity Expansion in Hydro Power Sector by CPSEs (Central Public Sector Enterprises) for the year ended March 2012’, which was tabled in the Parliament on Friday, the top auditor said that NHPC extended undue favour to HJV.

“… due to the award of the work to ineligible contractor by relaxing PQ criteria after sale of tender documents and ignoring the non-fulfillment of eligibility conditions, led to blocking of Rs 182.48 crore besides estimated cost overrun of Rs 243.54 crore and time overrun of 99 months in the project,” CAG said.

HJV was led by Maytas Infra along with Shankaranarayana Construction Company and Nagarjuna Construction Ltd. After many deliberations, NHPC cancelled the contract of HJV on March 9, 2012.

The investment approval for the proposed 800 MW Parbati II project, in Himachal Pradesh, was given on September 11, 2002 and the approved cost was Rs 3,919.59 crore. The cost estimate was later revised to Rs 5,353.21 crore.

“Finally, as on June 21, 2012, an amount of Rs 182.48 crore was still outstanding, chances of recovery of which were remote,” the report said.

The CAG said that the performance of HJV in the construction of head race tunnel of Parbati-II project was not satisfactory from September, 2002.

However, instead of cancelling the contract in 2005-06, when its performance was noted as far from satisfactory, NHPC sanctioned (December 2004 to October 2009) advances of Rs 131.65 crore beyond contractual provisions for recommencement of TBM (Tunnel Boring Machine) work, bridging gap and balance work.

“NHPC also deferred the recovery of advances and interest from time to time,” the report said.

The CAG report also said that in January 2008, the Power Ministry had set up a panel chaired by former Power Secretary P Abraham to suggest possible solutions with HJV to recommence work, excluding those related to Tunnel Boring Machine (TBM).

However, the chairman of the committee was also a member on the board of directors of Nagarjuna Construction Company — one of the partners of HJV.

The report said that “Thus, there was a clear conflict of interest… Audit also observed that the (Power) Ministry neither asked the chairman of the committee nor he himself disclosed his interest while chairing the committee,”

The Central Electricity Authority (CEA) envisaged a timeline of 10 years for a large size hydro project from planning to commissioning while NHPC has prescribed a timeline of about 6.5 to 9.5 years.

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